Australia revives reliability component of National Energy Guarantee

The mechanism will be debated at a meeting of state energy ministers this month, but emissions-reduction component will be absent.

The Australian government will revive the reliability obligation from the abandoned National Energy Guarantee, the federal energy minister has announced.

Speaking to the AFR National Energy Summit in Sydney on Wednesday, Angus Taylor said that the government aimed to introduce an obligation for reliable electricity supply on energy retailers “as soon as is practicable”.

The next meeting of the COAG Energy Council, a body comprising state energy ministers and the federal energy minister, is scheduled for 27 October, where implementation of the reliability mechanism will be discussed.

Reliability was one of three components of the ill-fated National Energy Guarantee, alongside reducing prices and lowering carbon emissions. Carbon emissions proved to be a major sticking point, though, eventually leading to the downfall of former prime minister Malcolm Turnbull and the abandonment of the policy.

The reliability obligation as set out in the NEG aims to provide adequate dispatchable electricity supply to meet peak demand.

This would be done using demand forecasts by the Australian Energy Market Operator for each region with pre-defined triggers. These triggers would oblige energy retailers to respond to sustained shortfalls in supply by investing in additional supply or entering into contracts that encourage additional generation or encourage demand side participation.

Any retailers that do not comply with the obligations would be penalised.

“We will back investment in fair dinkum [excellent], affordable and reliable investment,” Taylor said, encouraging state governments to place more emphasis on reducing energy prices.

He also said that there was “no room for bipartisanship” on energy policy at the federal level in Australia as long as the two main parties remained so far apart on renewable-energy targets. The Coalition supports a reduction in emissions of 26 percent on 2005 levels by 2030, while the opposition Labour Party is aiming for a 45 percent reduction and 50 percent renewable energy generation in the same period.

Responsibility for lowering carbon emissions no longer sits with the federal energy minister, with that brief separated in prime minister Scott Morrison’s first round of ministerial appointments.

Instead it is the responsibility of the environment minister Melissa Price, who earlier this week said “The Morrison government is committed to the Paris Agreement [on climate change] and takes its international obligations seriously.” That statement was made in response to the latest report released by the UN’s Intergovernmental Panel on Climate Change which warned that governments around the world have until 2030 to limit an increase in temperature to 1.5 degrees Celsius.

“Every extra bit of warming matters, especially since warming of 1.5ºC or higher increases the risk associated with long-lasting or irreversible changes, such as the loss of some ecosystems,” said Hans-Otto Pörtner, Co-Chair of IPCC Working Group II in a statement. That includes Australia’s Great Barrier Reef.

In an interview with Australia’s ABC News, however, Price was reluctant to commit to the complete phasing out of coal-fired power generation by 2050. “I think to say that it has to be phased out by 2050, is drawing a very long bow. […] I don’t know how you can just say that by 2050, you’re not going to have technology that is going to enable good, clean technology when it comes to coal.”

Also speaking at the National Energy Summit was Energy Security Board chair Kerry Schott, the main architect of the NEG. She said that the COAG Energy Council, which set up the ESB, had given it no instructions to stop working on developing NEG legislation.

“It’s a bit premature, I think, to declare the NEG dead,” she said. “The reliability component, certainly is still alive, and a bill is ready to go before the South Australia Parliament when the Energy Council approves it.”

Shadow minister for energy Mark Butler welcomed the resurrection of the reliability obligation and said his party would consider implementing a policy similar in structure to the NEG if elected in 2019, but added that the NEG “rests on the principle that the two major parties agree”, and that without a certainty over the energy policy framework investors would find decision-making difficult.

“You can’t price [risk] as an investor when you don’t know what the basic rules are,” he said.